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This paper discusses the effectiveness of inflation targeting strategies in different countries, highlighting key findings on inflation variability and factors influencing success. It provides insights on the impact of exchange rates, monetary policy transparency, and adoption of inflation targeting on inflation control. The analysis shows that countries like Denmark, Hong Kong, Japan, Taiwan, and the US share commonalities in their approach to inflation control. Despite varying economic conditions, these countries have been successful in managing inflation. The paper also examines the relationship between inflation, output, asset prices, and overall welfare, shedding light on the complexities of maintaining price stability. With a focus on empirical research, the paper praises the clarity and rigor of the analysis while pointing out potential challenges ahead. It raises important questions about the future effectiveness of inflation targeting in preventing deflation and market disruptions. Overall, the findings suggest that while inflation targeting has shown positive results, the true test of its efficacy may still lie ahead.

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  1. Comments on Inflation control… Why are some countries more successfulthanothers? ThórarinnPetursson Benoit Mojon (Banque de France) Inflation Targeting 20 Years on Conference Norges Bank, Oslo, 11 June 2009

  2. Outline • What the paper finds? • Comments • Praises • Why does IT work? • Inflation, output, asset prices and welfare

  3. What the paper finds? 1/3 • Inflation variability depends on • Exchange rate variability • Exchange rate pass-through • Monetary policy transparency • The adoption of inflation targeting

  4. What the paper finds? 2/3 • Inflation variability does not depend on • Size • Level of economic development • Trade composition • Output variability • Output sensitivity to world growth

  5. What the paper finds? 3/3 • Denmark, Honk Kong, Japan, Taiwan and the US have a lot in common!

  6. What the paper finds? 3/3 • Denmark, Honk Kong, Japan, Taiwan and the US have a lot in common! • Neither in EMU • Nor Inflation Targeters • Nor VSOEs • Nor Emerging

  7. Praises • Clean, rigorous empirical analysis • The paper is clear and very well written, a pleasure to read

  8. Comments • Why does IT work? • Inflation, output, asset prices and welfare

  9. Why does IT work? Diron and Mojon (2008)

  10. Why does IT work? Diron and Mojon (2008)

  11. Inflation, output, asset prices & welfare Cecchetti, Flores-Lagunes and Krause (2004)

  12. Inflation, output, asset prices & welfare Cecchetti, Flores-Lagunes and Krause (2004)

  13. Inflation, output, asset prices & welfare Cecchetti, Flores-Lagunes and Krause (2004)

  14. Inflation, output, asset prices & welfare Petursson

  15. Inflation, output, asset prices & welfare • IT performance and asset prices • Frappa and Mesonnier (2009) showed that IT targeters have had significantly higher asset price volatility (robust to # controls) • Why is unclear • False feeling of security (investors, CB) • Lower inflation risk premia => feed into asset prices • True test ahead • Short term: Will IT help anchor away deflation • Medium term: Will IT avoid that fiscal stimuli lead to a bond market crash

  16. Conclusions • Very nice empirical investigation showing that IT has worked • May be not on the most relevant issues of IT • True test for IT lies ahead of us

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